Like most areas of the general insurance market, data, analytics and technology are helping commercial property insurance providers make faster and more accurate decisions based on a holistic view of risk.  The big difference in commercial property (and to an extent home insurance) is that it is quite literally a picture or map of risk that’s being created – right down to an individual property outline – through the evolution of advanced geospatial data visualisation tools.

Knowing that visual imagery is more intuitive and speeds up the ability to assess risk, data visualisation tools developed specifically for the insurance sector have become increasingly sophisticated.  They help make immediate sense of the huge and growing volume of data at the market’s disposal.

This data includes the characteristics of a property (floors, height, roof type and so on); its location; the individuals behind the business; the crime and environmental risks including near real-time data on flood and river flows direct from the Environment Agency plus customer and policy data held within an insurance providers’ own databases.

All this data can now be analysed, aggregated and visualised in map form for use within the insurance continuum: marketing, pricing, underwriting, claims. The reason this is so powerful may seem obvious but it’s certainly non-trivial: data visualisation is a great way to tell a story with data.

As John Tukey, an influential American mathematician and theoretical statistician, once said: “The greatest value of a picture is when it forces us to notice what we never expected to see.”

Data visualisation aids human cognition of risk information

Compared to visualisation, cognition – which is handled in our brains by the cerebral cortex – is much slower and requires more effort to process information. Presenting data visually accelerates perception and helps to reduce cognitive load.

The power of the mapping is that it reveals where exposures and accumulations exist in an instant and shows insurance providers where there is capacity to write more business.  Fundamentally, the inclusion of all this data allows insurance providers to more accurately price each risk upfront relative to its unique profile.

The demand for this level of insight is only set to grow as commercial insurance providers face changing risks on two fronts. The first is climate change and the cost of claims emanating from extreme weather events. Profitability in commercial property insurance is significantly affected by weather conditions. A recent report suggests commercial property insurance rates were up around 44% in the UK for fourth quarter 2020.

The premium increases in commercial insurance last year were amongst the highest-ever recorded. Risks and the resulting cost pressures have continued to rise across all segments of commercial insurance, with rising insolvencies in the UK, the COVID-impacted economy and a lag in claims that followed withdrawal of parts of government support.

The second shift is the change in the use of commercial property space, partially caused by the pandemic.  Surveys suggest that the enforced exodus of workers from offices could be permanent for at least part of the week.  Insurance companies, as in other business segments, are adopting a more hybrid way of working, better suited to meet the needs of both employees that prefer working remote and those that enjoy being in the office.

Several banks across Europe recently have confirmed they will be closing branches and asking staff to work from home.  There are also questions over the future of town centres which were already in decline before COVID-19.

Supporting new datasets and data layers

Understanding which insured properties are vacant versus occupied in a flood, fire or a severe storm, knowing roads closed due to fallen trees, where flood water will flow or how a fire in one building could spread to another is now possible through the evolution of geospatial data visualisation tools such as LexisNexis® Map View, enabling complex property data to be quickly and easily understood and acted upon.

LexisNexis® Map View also takes care of the data management for insurers, providing a single interface for insurers to access all of their peril and policy: providing a single interface that can be accessed by workers anywhere in the world.

When a weather event occurs, using Map View insurance providers can look at a specific geographical region, a postcode, an address or a single property outline, pulling on a wide range of data including live feeds from the Environment Agency. 

This means that rather than wait for an influx of claims to assess the exposure to a climate event, they can upload their policy and claims data to visualise the risks and exposure for a whole book of business. They can understand which policyholders could be impacted and where on the ground resources need to be located.

The flexibility of the tools offered today makes it easy to filter down to the risks most of interest, focus on one property for underwriting purposes or a whole block of properties in the path of a coming storm.

The use of ‘live’ data also means that Estimated Maximum Loss and Potential Maximum Loss can be calculated.

Risk can be assessed as needed or a constant monitor created for a whole commercial property portfolio. Looking at a whole portfolio alongside past claims may also help insurance providers price more accurately and understand how they could help mitigate future claims and potential losses.

As well as supporting underwriting, pricing and claims management, with this visual depiction of risk, insurance providers can easily identify areas where they can sell more business in large cities and automatically see where they have areas of high concentrations of Sums Insured for reinsurance calculations.

Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurance providers.